tv Nightly Business Report PBS January 18, 2013 4:30pm-5:00pm PST
captioning sponsored by wpbt >> this is n.b.r. >> tom: good evening, i'm tom hudson. norwegian cruise lines sails to big gains on its first day as a publicly traded company. we talk with c.e.o. kevin sheehan. >> susie: i'm susie gharib. that debut helps get the i.p.o. market off to a strong start for 2013, as the broader market climbs to a five-year high.
>> tom: and should companies pay less attention to shareholders? whole foods c.e.o. john mackey joins us. >> susie: that and more tonight on "n.b.r." many american companies are gearing up to go public and investors are warming up to the idea of buying those shares. the success of the initial public offering of norwegian cruise lines on the nasdaq today could kick off a new wave of i.p.o.s. shares of the third largest cruise line operator in the u.s., skyrocketed more than 30%, from its $19 opening price. as erika miller reports, thanks to the bullish run in the stock market it could be full steam ahead for i.p.o.s. >> reporter: although 2012 was not exactly a banner year for initial public offerings, investment bankers expect things to improve this year. 8% of capital markets executives think there will be a substantial gain. 42% see a modest increase. but still one in five expect fewer companies to go public.
this is according to a recent survey by consulting firm b.d.o. for i.p.o.s, much depends on what happens to the u.s. stock market. >> the i.p.o. market is very schizophrenic. the window for offerings opens and closes very quickly depending on sentiment in the marketplace. companies going public are expected to raise a total of about $34 billion this year, a big drop from last year's $42 billion. but, remember, last year's figure is skewed by facebook, which accounted for over a third of the total dollars raised. there may be some new themes in listings this year. >> i think this year will be more focused on companies that are levered to the improvement in housing. 2012 was a big year for housing companies and i think 2013 will be a big year in which companies that have yet to go public in that space will do so. >> reporter: there are also several big technology companies that investors hope will go public. one is twitter.
although many i.p.o. experts don't think that will happen this year. another possibility is square--a mobile payments company founded by the man who created twitter. and, finally dropbox, a web- based file hosting service. but, it's understandable that many companies are approaching the i.p.o. market cautiously. they're wary of becoming the next facebook with a stock price that's still well below may's offering price. erika miller, "n.b.r.," new york. >> susie: it took a long time for norwegian cruise lines to make the big decision to go public. since the 1990's, it attempted several times to do an i.p.o., but pulled back. when i talked with c.e.o. kevin sheehan today, i asked him why he felt that the time was finally right. >> it's always a lot of pluses and minuses of being a public company, as you know, but at some point, we needed to take this step. and we thought this was the perfect time, you know, washington resolved its situation, and now we move into
the new year feeling a little bit more comfortable that things are resolved. >> susie: so, kevin, how do you feel about the stock performance today? >> year, it's fantastic. you always want to have some wind at your back and see the stock perform well. we priced the ipo at $19, and, you know, i kind of thought we'd be in the 22-23 range, but when people run the numbers on this business it is an unbelievable story over the coming years, and i think a lot of people got it. >> susie: so do you feel by going public that this gives norwegian a better shot at getting market share from royal caribbean. >> it's not market share. that works counter-intuitive because that restricts the pricing and gets into a very competitive landscape. when i was running avis, we were only as strong as our weakest competitor competitors and when one of the other players dropped their prices eventually you had to bring it down. i think allowing the industry to
grow smartly and each of us in their own way keeps everybody away from thinking somebody is trying to make a market share grab. >> susie: this is such a competitive business and you do have big rifles. what does it take to win in this market? >> you know, it's very interesting to watch the transformation of the company when i came in. we weren't considered seriously pie the other players to where they are now look at everything we do and we're the hot company, in my exprurk people want to come work furst and nobody wants to leave us. >> susie: what makes norwegian such a hot company? >> the north wegz "brack away" will be docking in new york. and michael bloomberg said this is a big deal. it really is. we have three broadway shows and edgy stuff that will give consumers another look at cruising. >> susie: so how is the cruise business these gays? given the weak economy, how are bookings? >> you know, we're feeling
pretty good. we're filling our ships every single week with consumers that are having a ball and going off the ships and talking to their friends and neighbors and that's what's driving us gluldz you do interact a lot with consumers, what's your take on consumers? are they willing to spend money to go on a vacation or are stay teastill cautious they don't want to splurge on a big trip? >> i think consumers have had a tough run and now they know what their tax situation is of for 2013 based on what happened in washington recently, and the ones work say i have nigh job, interest rates are low. it's not that bad. i want to take my vacation. >> susie: is business strong enough that you're going to add some jobs and what are your hiring plans? >> every time we launch a new ship, it brings on a lot more employees. we're 20,000 strong at this point. and if you think about there are a couple of thousand that come along with each new ship we're building in the future here. >> susie: kevin, thank you so much. great talking with you. >> appreciate it, take care.
>> reporter: still ahead, more than half a million people are expected to converge on washington this weekend for the president's inauguration. we'll take a look at the economic impact. >> tom: u.s. stocks were little changed, despite a big jump in growth in china. china's economy rose by nearly 8% during the last three months of 2012, up half a percent from the previous quarter. still, for the year, china's posted its weakest annual performance since the 1990s. on wall street: the dow rose 53 points, the nasdaq fell one point, the s&p up five points. for the week, the dow and the s&p were the big gainers, both up 1% or more. the nasdaq up just 0.3% on the week. >> susie: house republicans have an inauguration gift for president obama. they're offering up a compromise on the debt ceiling: a three month increase in the federal borrowing limit. it's expected to come to the house floor next week, but it
comes with strings attached. the proposal includes a condition that house and senate lawmakers pass a budget blueprint for the coming year or go without pay. house majority leader eric cantor said it's simple. congress shouldn't be paid for failing to do its job. >> tom: next week 80 companies are scheduled to turn in their latest quarterly financial report cards. but rather than the short-term focus on the bottom line, our next guest thinks businesses need to consider all stakeholders, not just shareholders. john mackey is the co-founder and co-c.e.o. of whole foods market. he's author of "conscious
capitalism: liberating the heroic spirit of business". john, why is concentrating on shareholders a myth as you call it? >> i don't know if concentrating on shareholders is a myth. i mean, most companies do concentrate on their shareholders. it's just not the best business strategy. because you have an interdependent stakeholder system where you need to create value for all of the stakeholders,nd that will also create value for your investors or shareholders. for example, at whole foods market, we have to create value for our team members. if they're happy and fulfilled in their work, then they will take care of our customers better and that will result in them being happy alcohol result in the investors being happy. happy team members result in happy cut can mers which result in happy investors. they're all interdependent on one another. >> tom: is that the priority you put the stakeholders in,
employees overcustomers er shareholrs? i kind of think you have to pretty much equally pryor tietz customers and your employees as the most important stakeholders, followed probably by investors, then suppliers, larger communities and the environment. they're all important. they all need to be taken into consideration. but i think the real secret sauce to a successful conscious business is prioritizing customers and employees. >> tom: one thing you have to deal with when talking about prioritizing customers is retail prices. food prices specifically. youeal with thesevery d directly. food inflation is moderated certainly from the big year-over-year increases we saw in 2011. it's been volatile, though. so how do you deal with that for your stakeholders, for your customers? >> there's not-- honestly, there's not that much you can do about it because if your raw cost goes up, you sort of have to pass those on. and i mean, i always think
people misunderstand inflation because it's really just the currency depreciating and working its way out through all the different sections. if the federal government increases the money supply faster than productivity you're going to see inflation. and that's what we're seeing in food right now because the fed's been increasing the money supply greatly. >> tom: john, let me ask you about the investor class as a stakeholder. whole foods stock is up 16% year over year. is the stock price the clearest expressionave company value? >> maybe not always in the short term. i think as ben graham once said, in the short term the stock market is aoting machine. but in the long run, it's a weighing machine. so i do think sometimes stock prices get out of whack from the intrinsic value of a company. but it tend to correct itself. so it can swing wildly in one direction or the other but it will correct itself.
so i don't know-- it's certainly an important indicator. i don't know if it's the best indicator. but you need to pay attention to it if you're a public company. >> tom: you certainly do, as you do, certainly, as want co-c.e.o. of whole foods. john mackey, the coauthor of "conscious capitalism." >> susie: president obama will take the oath of office for his second term monday afternoon, while the crowds this time around will likely be smaller, washington is still ready for the expected boost in spending. ruben ramirez reports. >> reporter: the review stands are up. the porta potties are ready.
the fencing has been erected. the presidential inauguration is washington's biggest event. but, unlike 2009's inauguration which drew nearly two million people to washington, this year's festivities are expected to draw just half that. >> this time around i think we are going to get a lot of people that did not come in 2009 simply because they were concerned about the fact that we had a record number of people in the city. >> reporter: it's not just the swearing in ceremony. there will also be 40 inaugural balls around the city and, hotels, like the george are ready. >> we have cufflinks, we have steamers and people who can service that. we even have bowties and a concierge that knows how to tie a bow tie. >> reporter: the george is sold out. but hotels and restaurants aren't the only ones that will see a spike in business. >> limo services and laundry services because all the table clothes, all the linens that have to be laundered so those businesses get a huge boost this time of year.
>> reporter: it's a time, which is usually quite for d.c.'s tourism industry. >> at the end of the day, it's about economists, about people spending money in the district and creating jobs. >> reporter: hotels have tripled rates and restaurants are on wait-list. those looking for last minute deals will likely be disappointed. >> rates for us are very competitive for the market and just based on our location we are going to do just as good as we did in the previous inaugurations. >> reporter: while the number of people visiting the nation's capitol for monday's inauguration is expected to be lower than in 2009, the turnout is expected to be the biggest ever for a second inauguration. ruben ramirez, "n.b.r.," washington. >> tom: this was the last trading day of president obama's first term and a late-day push helped the major stock indices close higher. the s&p 500 spent the morning in the red, before moving higher in the final 40 minutes of the session. the small gain was enough to put the index at a new five year
high. volume was much stronger. 983 million shares on the big board. almost 1.9 billioon the nasdaq. the industrial sector saw the strongest buying interest up 1%. the energy and utility sectors both were higher by 0.9% earnings were in focus with plenty of attention on general electric. the conglomerate earned 44 cents per share, a penny better than estimates and up from a year ago. g.e. said demand from china and other emerging economies helped offset the uncertainty with customers in the u.s. and europe. shares gained 3.5%. volume tripled with the stock closing above $22 for the first time sie october. g.e. said boeing has not changed its delivery schedule for g.e. jet engines used on the 787 dreamliner jet. investment bank morgan stanley had a much stronger than anticipated end to the year with investment banking and trading revenues up sharply. that helped the company earn 45 cents per share, reversing a year ago loss and well above what was expected. the bank has been trying to
shift its business away from trading for its own behalf into more of a wealth advisory d lient-focused model. shar rallied.9%. lume tpleds thstocsits at 17 month highs. like other investment banks, morgan stanley has been helped out by companies raising money by issuing debt and using morgan stanley to help find buyers of those corporate bonds. elsewhere in finance, american express fell 1.6%. fourth quarter earnings were only about half of what they were a year ago. credit card company capital one was down 7.5% as earnings and revenues came up short of wall street estimates. intel also saw a swift reaction to its earnings last night. profits were down as the company continues seeing fewer sales of semiconductors for traditional couters. shares fell hard, down 6.3%. among the concerns, stepped up spending by intel and the pressure than could put on short term earnings. four of the five most actively traded exchange traded products were higher.
the volatility note fell more than 6% with the broad market continuing to trade in a narrow range. and that's tonight's market focus. >> tom: the stock market may be hovering near five year highs but tonight's market monitor warns now is not the time to get real aggressive. jason pride is director of investment strategy at wealth management firm glenmede. jason, what makes you concerned about investors taking too much risk, even with the rally we've seen? >> there's reason to be constructive about the economy
and the markets. we have seen an improvement in the risks out there. we're seeing growth in the overall economy, but still, we're in a period of deleveraging. we're still having to deal with a lot of the excess debt sitting out there. the levels will of debt-- if there were a destruction, it would be hard for us to deal with. you have to have some caution or condition about how it will ultimately play out during the loer term time frame building some defense into your portfolio makes sense displom you're doing that by going with phillip morris international. a nice yield of 4%. that's a bit protective. and a stock price at close to $90 a share. what do you expect over the next 12 months? >> this is our broad theme of moving into the middle, taking away from the most risky equityes, taking away from the most defensive cash and treasury investments. that means being more defensive in equity. it's a quality growth dividend growth, stable business where the revenues will not move
around a lot in different economic environments but because of their high profit margins, they're able to generate a good amount of investment returns for us through the period. we think that's an ideal investment, preferg to be in the middle of the risk spectrum not on the two extremes. >> tom: are you willing to give up a littlibility of the volatility. in other words, do you expect phillip morris to keep pace with the overall market this year or do better or worse? >> it's not our intention to have phillip morris by itself keep pace just with the equity markets. remember, this is a lower risk investment. has some fixed income-like qualities to it. it should be more stable through the period. if it delivers a competitive return to the mark, not necessarily outpacing it in an upward surge, that will be acceptable to us. while we're taking less risk in equity, we want to take more risk in fixed income, squeezing into the middle of the risk spectrum for investors gloment same strategy you had when you were with us july 13.
you were looking at big consumer gds, colgate palmolive, up 3.4%, add a dividend on top of that. and high-yield corporate bond exchange traded fund to illustrate your affinity for junk debt, hyg, the ticker, up 4% plus the dividend pup still like these? >> we still like them. we still have holdings in both of them-- generally in both of them. we don't have direct exposure to the indix. we tend to do that in our own priority funds. the idea is still there. last year, we got a bigger bang for our buck from th fixed income risk taking than from the defensiveness in equities. but that could either way, and we think that focus on the middle of the risk spectrum is advantageous versus the two extremes of traditional equities. >> tom: you mentioned you don't have direct exposure to the high-yield exchange traded funds. what about the two equity uz mentions?
>> the two equities we are direct exposure to. >> our friday market monterguest is jason pride. >> thanks for having me. >> susie: between twitter and facebook, the way we communicate keeps evolving. this week lou's been thinking about connecting versus social networking. here's author and educator lou heckler. >> there was this story in our local paper a while back. a married couple was sitting on a love seat in their home, virtually knee-to-knee. each had a laptop computer and they were typing. the interviewer asked them what they were doing. the answer: "we're arguing about something and we're doing it so our friends can be part of the discussion." is that really connecting in the way all these social networks are supposed to help us do? funny, isn't it? we have the power to be more electronically networked than ever before, but are we really connected? when we ask someone today if they have lots of friends, do they answer with actual, physical friends or electronic friends? i'm not in the 25-35 demographic, so maybe i see things differently. to me, connection comes from
finding an area of common interest; exploring that interest with others and physical contact with one another. if i read something online about a friend and want to talk with them about it, i call them. i want to hear their voice, feel their emotion, share their joy or pain. i'll keep networking, but what i really want to do is connect. i'm lou heckler. >> susie: monday on "n.b.r.," with the markets closed for the martin luther king junior holiday, we bring you an "n.b.r." special edition: u.s. innovation. america has a long history as the world's leading innovator. but what will it take to stay competitive and remain a beacon of innovation? suzanne pratt has the story. >> reporter: the u.s. has put the world behind the wheel and an iphone in millions of pockets. but, we may be losing our competitive edge. some say it's cause america's fragile economy is a distraction for corporate america. others point to our inferior infrastructure and subpar public
education. but, adam segal senior fellow at the council on foreign relations and author of "advantage" says the big problem is others are gaining ground. >> we have been running in place for the last three or four years because of the recession, spending on r&d, and big ideas seem to be fairly scarce. while china just continues to funnel more and more money into it. >> reporter: still many argue thu.s.ill ways be extremely competitive because we are the most innovative place in the world. what better place to witness innovation at work here at ibm in westchester county new york. this is the home of watson, big blue's super computer. watson was clever enough to beat jeopardy champions at their own game just a few years ago. now, i.b.m. researchers are working on new uses for the brianiac computer, particularly in the field of medicine. bernie meyerson calls himself i.b.m.'s head geek. he says innovation is critical
for companies and societies to survive and thrive. and, yes, there is a magic ingredient. >> continuity. in the down cycles of the economy the temptation is always, "well, we'll just cut the front end, we won't do our research, we're not going to work on development." so you empty the pipe. then when the economy turns and it always turns, when that economy turns you have nothing in the pipe. and, people run you over out of the gate. >> reporter: but, not all innovation happens in multibillion dollar labs. here in manhattan's fashion district, www.ilikewhatyourwearing.com is trying to ignite a fashion revolution. started by olivia gossett, the website sells cutting edge clothing by rising designers. but, it's also an online magazine-- one that uses cute articles to sell products and foster those independent designers. >> i think we're opening up
gateways in the industry for other people that otherwise wouldn't have a chance to make a name for themselves. you know you see the same dress on four different websites for four different prices from the same label and you're left kind of wondering isn't their more out there. >> reporter: ilwyw.com may not help cure for cancer, but it might create jobs. and, it's part of a push by new york city's borough president scott stringer to make the big apple a destination for start- ups. what he calls the innovation economy. >> how we take advantage of it will define the economic success of this city at a very interesting time in our history, after 9/11 post hurricane, dealing with infrastructure challenges and budget deficits and we need to expand our tax base and we need to take advantage of what's happening right now. >> reporter: exactly how we take advantage is ripe for debate. but, most agree better education and visas for the scientists we train in the u.s. is a good start. and, remember what i.b.m.'s
myerson said about continuity: it's just as important to a country, as it is to a company. >> the moment you believe there is no nger of losing your edge is when it disappears on you. >> reporter: suzanne pratt, "n.b.r.," at the watson research center. >> susie: be sure to join us on monday for our special edition on american innovation. that's it for us this friday evening. have a great weekend everyone. you, too, tom. >> tom: goodnight, susie. we'll see you online at nbr.com and back here monday night. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org